[Federal Register Volume 62, Number 127 (Wednesday, July 2, 1997)] [Notices] [Pages 35870-35872] From the Federal Register Online via the Government Publishing Office [www.gpo.gov] [FR Doc No: 97-17319] ----------------------------------------------------------------------- SECURITIES AND EXCHANGE COMMISSION [Release No. 34-38781; File No. SR-NASD-97-41] Self-Regulatory Organizations; Notice of Filing of Proposed Rule Change by National Association of Securities Dealers, Inc. Relating to the Definition of Branch Office in Rule 3010 June 26, 1997. Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 (``Act''),\1\ notice is hereby given that on June 17, 1997, the National Association of Securities Dealers, Inc. (``NASD'') filed with the Securities and Exchange Commission (``SEC'' or ``Commission'') the proposed rule change as described in Items I, II, and III below, which Items [[Page 35871]] have been prepared by NASD Regulation, Inc. (``NASDR'').\2\ The Commission is publishing this notice to solicit comments on the proposed rule change from interested persons. --------------------------------------------------------------------------- \1\ 15 U.S.C. 78s(b)(1) (1988). \2\ The proposed rule change has not yet been approved by the NASD Board of Governors. Accordingly, the NASD has consented to an extension of the period of time specified in Section 19(b)(2) of the Act until at least thirty-five days after it has filed an amendment advising the Commission of the action taken by the NASD Board of Governors. See letter from Craig L. Landauer, Associate General Counsel, NASD Regulation, to Mignon McLemore, Division of Market Regulation, SEC, dated June 24, 1997. --------------------------------------------------------------------------- I. Self-Regulatory Organization's Statement of the Terms of Substance of the Proposed Rule Change NASDR is proposing to amend Conduct Rule 3010 of the NASD, to create another exception to the definition of branch office. Below is the text of the proposed rule change. Proposed new language is in italics. 3010. Supervision (g) Definitions * * * * * * * (2) ``Branch Office'' means any location identified by any means to the public or customers as a location at which the member conducts an investment banking or securities business, excluding: * * * * * * * (D) any location where a person conducts business on behalf of the member occasionally and exclusively by appointment for the convenience of customers, so long as each customer is provided with the address and telephone number of the branch office or OSJ of the firm from which the person conducting business at the non-branch location is directly supervised. * * * * * * * II. Self-Regulatory Organization's Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change In its filing with the Commission, the NASD included statements concerning the purpose of and basis for the proposed rule change and discussed any comments it received on the proposed rule change. The text of these statements may be examined at the places specified in Item IV below. The NASD has prepared summaries, set forth in Sections A, B, and C below, of the most significant aspects of such statements. A. Self-Regulatory Organization's Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change The definition of a branch office, found in NASD Rule 3010, includes any location identified by any means to the public or customers as a location at which the member conducts an investment banking or securities business, subject to several exceptions. If a business location of a member meets the definition of a branch office, such office must be identified to the NASD through the filing of a Schedule E to Form BD and such location is subject to an annual NASD fee of $75.00. Several members have asked for guidance from NASDR staff as to the application of the branch office registration requirements where a business location is used exclusively for appointments from time to time between registered representatives and customers. This issue may arise under networking arrangements between NASD members and banks. In this context, registered persons of the member may periodically schedule appointments with bank customers at a bank location where the NASD member conducts no securities activities. Under the Interagency Statement on Retail Sales of Non-deposit Investment Products, banks are required to use signage at the place of the appointment to identify the NASD member that employs the registered person.\3\ This use of signage at the appointment may imply the need for the location to register as a branch office. The NASD is proposing to create another exception to the definition of branch office to address this type of situation. --------------------------------------------------------------------------- \3\ Board of Governors of the Federal Reserve System et al., Interagency Statement on Retail Sales of Non-deposit Investment Products, at 10 (February 15, 1994). --------------------------------------------------------------------------- The proposed amendment would add language to paragraph (g) of Rule 3010 to exempt from the branch office definition certain locations where a person conducts business for the member firm occasionally and by appointment only for the convenience of customers, and where the member maintains no other tangible presence. To be consistent with other provisions of Rule 3010, the person conducting business at such locations would be required to provide each customer with the address and telephone number of the branch office or office of supervisory jurisdiction (``OSJ'') of the firm from which the person who is conducting the meeting is supervised. The NASD believes that the proposed rule change is consistent with the provisions of Section 15A(b)(6) \4\ of the Act. The NASD believes the proposed rule change will provide clarification regarding branch registration requirements and will ease the filing burden of many members without compromising the ability to monitor compliance. --------------------------------------------------------------------------- \4\ Section 15A(b)(6) requires that the rules of the Association be designed to prevent fraudulent and manipulative acts and practices, to remove impediments to and perfect the mechanism of a free and open market, and in general, to protect investors and the public interest. --------------------------------------------------------------------------- B. Self-Regulatory Organization's Statement on Burden on Competition The NASD does not believe that the proposed rule change will result in any burden on competition that is not necessary or appropriate in furtherance of the purposes of the Act. C. Self-Regulatory Organization's Statement on Comments on the Proposed Rule Change Received From Members, Participants, or Others Written comments were neither solicited nor received. III. Date of Effectiveness of the Proposed Rule Change and Timing for Commission Action Within 35 days of the date of publication of this notice in the Federal Register or within such longer period (i) as the Commission may designate up to 90 days of such date if it finds such longer period to be appropriate and publishes its reasons for so finding or (ii) as to which the self-regulatory organization consents, the Commission will: A. By order approve such proposed rule change, or B. Institute proceedings to determine whether the proposed rule change should be disapproved. IV. Solicitation of Comments Interested persons are invited to submit written data, views, and arguments concerning the foregoing. Persons making written submissions should file six copies thereof with the Secretary, Securities and Exchange Commission, 450 Fifth Street, N.W., Washington, D.C. 20549. Copies of the submission, all subsequent amendments, all written statements with respect to the proposed rule change that are filed with the Commission, and all written communications relating to the proposed rule change between the Commission and any person, other than those that may be withheld from the public in accordance with the provisions of 5 U.S.C. 552, will be [[Page 35872]] available for inspection and copying in the Commission's Public Reference Room. Copies of such filing will also be available for inspection and copying at the principal office of the NASD. All submissions should refer to the file number in the caption above and should be submitted by July 23, 1997. For the Commission, by the Division of Market Regulation, pursuant to delegated authority.\5\ --------------------------------------------------------------------------- \5\ 17 CFR 200.30-3(a)(12) (1996). --------------------------------------------------------------------------- Margaret H. McFarland, Deputy Secretary. [FR Doc. 97-17319 Filed 7-1-97; 8:45 am] BILLING CODE 8010-01-M